It’s hard to believe that we’ve reached the second half of November. Before you know it, you’ll be opening presents and toasting to the new year.
At this point, you may have a number of year-end financial tasks to check off your list. And one of the tasks you may be considering is opening a certificate of deposit (CD) before 2024 comes to a close. Here are a few great reasons to do so.
1. CD rates are still strong
You may be aware that the Federal Reserve has already cut its benchmark interest rate twice this year, and that more rate cuts are expected in the coming months. But don’t take that to mean that CDs are no longer worth opening.
It’s true that the days of 5% CD rates are mostly behind us at this point. But you can still snag a CD in the 4% range, which is a pretty good deal in its own right. For a 12-month CD and a $10,000 deposit, a 4.5% rate puts $450 in your pocket.
Our Picks for the Best High-Yield Savings Accounts of 2024
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American Express® High Yield Savings  APY 4.00% Rate info Min. to earn $0 Member FDIC. |
APY 4.00% Rate info |
Min. to earn $0 |
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Capital One 360 Performance Savings  APY 3.90% Rate info Min. to earn $0 Member FDIC. |
APY 3.90% Rate info |
Min. to earn $0 |
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Western Alliance Bank High-Yield Savings Premier  APY 4.46% Rate info Min. to earn $500 to open, $0.01 for max APY Member FDIC. |
APY 4.46% Rate info |
Min. to earn $500 to open, $0.01 for max APY |
However, today’s CD rates may not last much longer. As the Fed moves forward with additional rate cuts, CDs are apt to start paying less. So if you have the money to put into a CD, you probably don’t want to wait. Click here for a list of the best CD rates today to find the best one for your money.
2. You don’t have such a long savings window
Even though you can find a CD in the 4% range today, you should know that over time, the stock market is likely to reward you more substantially. Over the past 50 years, the S&P 500’s average annual return is 10%, accounting for periods of gains as well as losses.
But the key to being successful as a stock investor is to give yourself plenty of time for your portfolio to gain value and to ride out market downturns. If you don’t have such a long window ahead of you because you’re saving for a specific goal, like buying a new car or a house, then a CD is a better bet.
With a CD, you’re not taking a risk of losing any of your deposit, provided you limit it to $250,000 and stick to an FDIC-insured bank.
Of course, if you’re saving for a goal that’s about seven years away or longer, then it could pay to put your money into a brokerage account and invest it instead. But if you’re short on time to grow your money, a CD is a more appropriate choice.
3. You’re retiring in 2025 and want a safe place for your cash
If your financial plans for the new year include leaving your job and kicking off retirement, you may be excited for that final countdown. But in that case, you may also want to hold off on investing money you have available today.
Once you retire, you might need that money to pay your expenses since you won’t be earning a paycheck from a job anymore. And in that case, opening a CD is a much safer bet than putting your money into stocks at this stage of the game.
To be clear, this doesn’t mean that if you have an IRA loaded with stocks, you should cash all of them out immediately. Rather, you may want to hold off on investing new money in stocks because of the risks involved.
At this point, you still have several weeks left to open a CD before the end of 2024. But do know that the longer you wait, the more you might risk losing out on a better rate. So if you’re sure a CD is right for you, it pays to get moving as soon as you can.
